Luottohäviö

Luottohäviö, often translated as credit loss or bad debt, refers to a situation where a borrower fails to repay a debt according to the agreed terms. This can occur for various reasons, including financial difficulties, insolvency, or deliberate default. For lenders, whether individuals, financial institutions, or businesses, luottohäviö represents a direct financial loss.

The impact of luottohäviö extends beyond the immediate loss for the creditor. It can influence credit markets by increasing the cost of borrowing for everyone, as lenders may raise interest rates to compensate for potential defaults. For businesses, significant credit losses can strain cash flow, affect profitability, and even lead to bankruptcy.

To mitigate the risk of luottohäviö, lenders employ various strategies. These include thorough credit assessments of potential borrowers, requiring collateral, diversifying loan portfolios, and using credit insurance. Legal mechanisms are also in place to recover outstanding debts, though the success of these efforts often depends on the borrower's financial situation. Managing and accounting for luottohäviö is a crucial aspect of financial risk management for any entity that extends credit.